On September 25, some of the world’s top tax professionals gathered for a day of thought leadership and discussion on the evolving complexities of international tax law. The one-day summit, FUSION 2025, featured panelists from three different continents and seven countries — covering topics such as Pillar 2 updates, the impact of global trade wars, and trends among auditors in various regions of the world.
Below, we’re sharing some insights from a panel discussion focused on transfer pricing (TP) trends in Europe and Asia. With transfer pricing in transition, here’s what global businesses need to know about audit, restructuring, and other TP pressures. The panelists for this session were Florian Gimmler, a Partner at WTS Germany, and Martin Ng, a Managing Partner at WTS China.
Overview
Transfer pricing — once treated as a routine compliance exercise — is now rising to the top of the strategic agenda for many multinational corporations. As global tax rules tighten and economic headwinds loom, TP is no longer an afterthought. It’s being put under a microscope by tax authorities.
With the rise of global minimum tax regimes, BEPS 2.0, and shifting supply chains, companies that once used simple intercompany pricing models are being forced to restructure how they attribute value and allocate profits across jurisdictions.
Europe: From “Fish Markets” to Forensic Audits
Trend #1: Aggressive Tax Auditing
Fifteen years ago, a German TP audit often looked like a simple “fish market” negotiation: Tax authorities would challenge one or two of that company’s comparables, quibble over those items, and review their documentation. Ultimately, multinationals and German inspectors would usually land somewhere in the middle.
That world is gone. In Europe, transfer pricing is currently under a lot more scrutiny. Tax officials not only comb through data to make their cases, but they also analyze a company’s decision-making processes, business descriptions, and overall risk management.
According to Florian Gimmler, transfer pricing today can look a lot like a thorough business-management review. “Authorities understand value chains to a very deep degree. They ask questions; they challenge price allocation,” he says.
German and other European tax authorities have fundamentally shifted how they examine transfer pricing:
- Less emphasis on contractual risk allocation
- Greater scrutiny of actual functions and decision-making within a company
- Deep dives into risk control, value chains, and IP exploitation
Additionally, the use of specialized government task forces to conduct audits is on the rise, especially in sectors such as pharma, technology, and consumer goods.
Trend #2: Shifting Burden of Proof + AI Tools
Gimmler described a real-world scenario that recently unfolded in Germany: Inspectors entered into a case not with questions but with conclusions, arriving at the kickoff meeting backed by hundreds of thousands of data points pulled directly from taxpayers’ ERP systems.
In that case, the government inspector entered the kickoff meeting alone, downloaded 350,000 SAP records, identified margin deltas across markets, and proposed a €40M adjustment. With the help of bots and data crawlers, investigators are armed with more tools than ever before.
Generally speaking, with authorities marshaling so much digital evidence, the burden falls on the taxpayers to disprove the tax authorities.
Trend #3: Sophisticating Companies
As tax authorities have assumed a more aggressive stance on auditing, companies are investing more in their TP planning and structures, and these investments vary from jurisdiction to jurisdiction:
- The more tax-efficient a local TP structure is, the greater the need for companies to invest in TP dispute prevention and to beef up their transfer pricing files.
- The more generous a TP structure is with the local territories, the less you have to spend on prevention.
Asia: Negotiations Make For a Very Different TP Mindset
Trend #1: Soft Power Still Rules
Despite not being an official OECD member, the Chinese government generally follows the body’s international guidelines. However, most of the TP cases in China are never formally documented, typically being resolved with local authorities rather than sent up a chain of command.
The result of these informal dynamics is a much different landscape than what exists in Europe. Technical documentation of TP compliance is less important than how a company negotiates its case. Ng notes that knowing “how to work out a win-win situation, how to communicate, and how to educate authorities at the local level about transfer pricing” is essential to a favorable outcome.
Trend #2: APAs and MAP Remain Rare
One reason negotiations remain king in TP disputes in China is that advanced pricing arrangements and mutual agreement procedures are rarely used. Ng shared that China approves fewer than 10 APAs per year, prioritizing only industry-leading taxpayers with large national footprints. MAP has improved, but remains slow and is used selectively.
Without the routine use of these tools, audits originate differently in China compared to Europe. The three most common triggers are: companies that operate at a loss, companies with thin profit margins, and companies that fail to produce their TP documentation on time.
Restructuring Trends in Europe and Asia
In Europe, more companies are moving intellectual property (IP) back to the U.S. While companies once sought to shift IP into low-tax European jurisdictions, today many are seeking the opposite: With U.S. tax incentives and BEAT considerations at play, inbound IP transfers are increasingly attractive.
However, Europe’s IP transfer rules can trigger significant exit taxation, especially in Germany. If taxpayers cannot substantiate “other realistic options available” — a key OECD concept — authorities may impose substantial exit charges.
In China, restructuring is uniquely challenging because the government’s foreign exchange regulation and practical administrative behavior do not always align. Business restructuring in China is complicated by a number of exchange rules:
- China is one of the few major economies with strict foreign exchange (FX) controls, which loom over every restructuring. FX rules dictate which payment types are allowed, which documentation is required, and how funds must flow.
- Offsetting intercompany payables and receivables — common elsewhere — is prohibited and penalized in China.
- Cross-border cash pooling requires multi-party approval from domestic and foreign banks and regulators.
One of the most critical practical differences in China compared to other jurisdictions is that restructurings cannot be treated as a single integrated transaction. Even if a multinational views the restructuring as a single global package — for example, shifting functions, assets, people, and contracts — Chinese tax authorities require each component to be analyzed and priced separately.
How GTM Can Help
There are many moving parts in this new international tax and trade landscape. At GTM, we offer a range of tax solutions and industry-leading expertise. Our team is available to walk clients through policy shifts, technology and automation solutions, and tax filings on your behalf or through a collaborative structure.
Learn more about the tax solutions we’ve brought to clients here. Reach out to GTM today to discuss how to prepare effectively for your tax future.
